Controlling Lng AES Sparrows Point Lng, Llc V. Smith, 527 F.3d 120 (4Th Cir. 2008)

By Erdle, James C., Jr. | Energy Law Journal, July 1, 2008 | Go to article overview

Controlling Lng AES Sparrows Point Lng, Llc V. Smith, 527 F.3d 120 (4Th Cir. 2008)


Erdle, James C., Jr., Energy Law Journal


I. INTRODUCTION

In AES Sparrows Point LNG, LLC v. Smith, the United States Court of Appeals for the Fourth Circuit determined that the Natural Gas Act (NGA) preempted a zoning amendment that would have prevented the construction of a liquefied natural gas (LNG) facility.1 The court found that the zoning amendment was not part of Maryland's Coastal Management Program (MCMP) and therefore could not fall into one of the exceptions for state legislation in the NGA.2 The Fourth Circuit reversed the District Court of Maryland,3 which had (1) held the zoning amendment was not preempted by the NGA because it fell into one of the three categorical exceptions for the states in the NGA,4 and was (2) not an undue burden on interstate commerce.5

II. CASE OVERVIEW

This dispute was before the Maryland District Court twice, and is further complicated by the Maryland governmental authorities' actions in mid-suit. On November 3, 2005, plaintiff AES Sparrows Point LNG, LLC (AES) leased a site at 600 Shipyard Road in Baltimore County, Maryland with the intention of building a LNG facility.6 On March 24, 2006, AES started the requisite process of filing an application with the Federal Energy Regulatory Commission (FERC) for permission to construct the LNG at the leased site.7 The news of AES's plans to build the LNG provoked some public concern and in reaction to this concern, the Baltimore County Council approved bill 71-06.8 This ordinance, which would have prevented AES from building the LNG facility, stipulated a LNG terminal "could only be constructed with a 'special exception' and had to be at least [five] miles from residential zones and 500 feet from business zones."9

On September 22, 2006, AES filed a lawsuit seeking declaratory and injunctive relief against the County Executive of Baltimore, the Zoning Commissioner for Baltimore County, and Baltimore County.10 The suit claimed the NGA preempted the Baltimore County bill under the Supremacy Clause of the United States Constitution.11 AES subsequently filed a motion for summary judgment, and the defendants filed a motion to dismiss on the grounds of ripeness and subject matter jurisdiction.12 Although the district court found the zoning restriction violated the Supremacy Clause, and granted AES's motion for summary judgment on January 10, 2007,13 Baltimore County was undeterred.

Thirty-six days later, on February 5, 2007, Baltimore County passed Bill 907 (an effort to amend Baltimore County Zoning Regulation Article 105)14 to prevent AES from constructing the LNG because it would have been one of the prohibited uses in Baltimore County's Chesapeake Bay Critical Areas.15 The next day, AES filed the present suit seeking injunctive and declaratory relief, because this new bill would also prevent construction of the LNG facility.16 On February 9, 2007, AES was granted a temporary restraining order until the court could rule on the motions for declaratory and injunctive relief.17

On this same day in February, Baltimore County tried to get the County's Critical Area Protection Program to include a restraint on LNG siting in coastal areas.18 Even as the District Court was conducting a hearing on the motions for declaratory and injunctive relief, the Critical Area Commission adopted the zoning amendment.19 Maryland never presented Bill 9-07 to the National Oceanic and Atmosphere Administration (NOAA) for approval as required by the procedures of the Coastal Zone Management Act (CZMA) for amending a state's CMP.20

The District Court concluded that Bill 9-07 was not preempted by the NGA, because when Maryland adopted Bill 9-07 into the County's CAPP, it also incorporated the bill into its CMP.21 The district court further concluded that Bill 9-07 was an exercise of Maryland's delegated authority under the CZMA and, therefore, was not preempted by the NGA.22 AES's request for declaratory and injunctive relief was denied and this appeal followed. …

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